Key takeaways
- The spread is the gap between the bid and ask price and is paid on every trade.
- Swap, or overnight financing, applies when a leveraged position is held past the daily cut-off.
- Some accounts or instruments also charge a commission per trade.
- Slippage occurs when an order fills at a different price from the one requested, often in fast markets.
- Costs matter most for frequent traders and for positions held for many nights.
01What Is the Forex Spread?
Every instrument has two prices. The bid is what you receive when you sell; the ask is what you pay when you buy. The difference is the spread. In currency markets this is the forex spread, and it is the most basic cost of trading CFDs and forex.
Hypothetical example: EUR/USD shows bid 1.10000 and ask 1.10012. The spread is 0.00012, or 1.2 pips. If you buy at 1.10012, the position immediately shows a small loss because you could only sell at 1.10000. The price needs to rise by the spread before you break even.
Fixed vs variable spreads
Some pricing models keep the spread constant; others let it move with market conditions. Variable spreads are often tighter in busy hours but can widen sharply in quiet periods or around major announcements. The spread you see in the app at the moment you trade is the one that applies.
02Why Spreads Widen and Narrow
The forex spread is not a fixed number; it breathes with market conditions.
- Liquidity: major pairs such as EUR/USD usually have the tightest spreads because so many participants trade them. Exotic pairs and thinner markets tend to have wider spreads. Our guide to major currency pairs compares them.
- Time of day: spreads are typically tightest when London and New York overlap and can widen around the daily rollover and during the late US and early Asian hours.
- News: in the seconds around high-impact releases, liquidity providers often pull back and spreads can widen dramatically.
- Volatility: during market stress, spreads on gold, oil and indices can stay wider than usual for longer periods.
Knowing these patterns helps you avoid paying more than necessary simply because of when you click Buy.
03What Is Swap (Overnight Financing)?
When you hold a leveraged position past the daily cut-off time, a swap is applied. It reflects the cost of financing the full position overnight. In forex, it is linked to the interest-rate difference between the two currencies in the pair, plus a provider markup; for other CFDs, it is typically based on a benchmark interest rate.
- Negative swap: a charge deducted from your account, the most common outcome.
- Positive swap: occasionally, holding a currency with a higher interest rate against one with a lower rate can produce a small credit, though markups often reduce or remove it.
- Triple swap: many platforms apply three days of swap on one weekday, often Wednesday, to cover the weekend. The exact day depends on the provider and instrument.
Swap rates change over time and differ between providers, long and short positions and instruments. Check the current values in the instrument details before holding a trade overnight.
Compare live spreads across gold, forex and indices before you trade: download QTFX Markets on Google Play and explore the quote screen on a demo account.
Get it on Google Play04Commission and Slippage
Commission
Some account types or instruments, particularly share CFDs, charge a fixed or percentage commission on each trade, sometimes in exchange for tighter spreads. When comparing costs, add spread and commission together rather than looking at either alone.
Slippage
Slippage is the difference between the price you expected and the price you actually got. It happens when prices move quickly between the moment you send an order and the moment it fills, or when the market gaps past a pending order. Slippage can occasionally be positive, but in fast-moving markets it is usually negative, and leverage in trading magnifies its effect on your account. Stop orders are especially exposed because they become market orders once triggered. Our guide to stop loss and take profit explains how gaps affect stop fills.
05Putting It Together: A Cost Example
The figures below are invented to show the calculation. They are not QTFX’s actual spreads, swaps or commissions.
| Cost item | Assumption | Cost on 1 standard lot (100,000 units) |
|---|---|---|
| Spread | 1.5 pips, at $10 per pip | $15.00 |
| Commission | None in this example | $0.00 |
| Swap | −$6.00 per night, held 5 nights incl. one triple day | $42.00 (7 nights’ worth) |
| Slippage on exit | 0.5 pip | $5.00 |
| Total | $62.00 |
In this example, the position needs to gain more than 6 pips just to break even. For a day trader closing before the cut-off, the forex spread is the main cost; for a swing trader holding for weeks, swap can become the larger item. Use our pip value calculator to convert pips into money for any lot size.
06Reducing the Impact of Costs
- Trade when liquidity is high, typically during the main sessions for your instrument. See our guide to forex market hours.
- Avoid entering seconds before major news, when spreads may widen.
- Check the swap before holding overnight, especially for multi-week trades.
- Trade less often if costs are eating into results; frequent small trades multiply spread costs.
- Use limit orders where appropriate to control entry price, accepting that they may not fill.
- Factor costs into position sizing so they do not push a trade past your planned risk.
07Checking Spreads in the App
The QTFX Markets quote screen shows market prices, price changes and the current spread for each instrument, alongside daily highs and lows. Adding instruments to a watchlist lets you compare spreads at different times of day and see how they behave around news. Before trading live, open the instrument details to review costs that apply to your account and region.
Remember that costs are only one part of risk. CFDs are complex, leveraged instruments, and price moves can produce losses larger than you expect. Only trade money you can afford to lose and confirm that CFD trading is permitted where you live.
Questions readers ask
What is a spread in forex?
The spread is the difference between the bid price, at which you can sell, and the ask price, at which you can buy. It is usually measured in pips and represents a built-in cost of every trade. A position opened at the ask must move by at least the spread before it reaches break-even when closed at the bid.
What is swap in forex trading?
Swap is an overnight financing adjustment applied to leveraged positions held past the daily cut-off time. In forex, it reflects the interest-rate difference between the two currencies plus a provider markup, and it can be a charge or occasionally a small credit. Many platforms apply three days of swap on one weekday to cover weekends.
Why did my spread suddenly get wider?
Spreads widen when liquidity falls or volatility rises. Common causes include major economic releases, the daily rollover period, quiet late-night hours, holidays and periods of market stress. Variable spreads adjust to these conditions automatically. Checking the economic calendar and trading during active sessions can help you avoid the widest spreads.
How can I avoid paying swap?
The simplest way is to close positions before the daily cut-off time, which is how most day traders operate. If you hold trades overnight, check the swap values for both long and short positions beforehand, since one side may cost more than the other. For longer-term trades, include expected swap costs in your planning and position sizing.
